It’s the silly season, the time of year when pundits make their predictions for the year. Barrett Sheridan writing in Newsweek’s Techtonic Shifts blog declared 2010 the year of the paid subscription.
He suggests that cloud-based fee charging services will replace both the mp3 as well as free services such as Pandora and Last.fm. Sheridan points to Apple’s purchase of LaLa as evidence that Apple intends to create a subscription iTunes.
Last year the Wall Street Journal's VentureWire wrote:
One thing most entrepreneurs and investors seem to agree on is that the free, ad-supported model isn’t working as planned. "Paid is the future of music, that’s the model," said John Cogan, co-founder of online music retailer Lala Media Inc.
Paid subscriptions might be what investors want, but it isn’t clear listeners agree. We have pointed out in the past that many of the music streamers offer a fee-based premium service in addition to their free streams. Only a very small percentage of members opt to pay for a slightly better version of something that they can get for free.
A new Harris Interactive poll raises further questions about whether Newsweek’s prediction will come true in 2010 or ever. Only one in four people would be willing to pay to read a newspaper on line. Only 23% will pay any amount, and of those, 83% would only be willing to pay less than $10 a month.
The study looks only at newspaper, but there’s little evidence supporting a subscription model for music. Yahoo! tried and failed, Rhapsody is suffering massive cancellations, and even satellite radio subscriptions are slipping.
Inside Radio headlined Pandora’s achievement of profitability in 2009. Of course, as a private company they have no obligation to release their financials, and they didn’t. We’ll have to take their word that with $40 Million in advertising revenues, they were profitable.
We noted the other day that private investors had pumped $56 Million into Pandora, so they must be pleased that the company turned a profit, even a single dollar. However, to put the $40 Million revenue into perspective, WBBM-AM in Chicago billed nearly as much. Terrestrial radio managed to generate nearly $500 Million in online sales alone. Maybe Inside Radio could have pointed that out.
So it isn’t clear whether people will be willing to pay for subscription radio, and it isn’t clear whether Internet radio can be financially viable just selling spots and giving the service away for free.
Should be interesting to see how this all turns out.